Question : Assertion: Consumer equilibrium occurs when the consumer's budget line is tangent to the highest possible indifference curve.
Reason: At this point, the consumer is maximizing their utility within the given budget constraint.
Option 1: Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Option 2: Both the assertion and reason are true, but the reason is not a correct explanation of the assertion.
Option 3: The assertion is true, but the reason is false.
Option 4: The assertion is false, but the reason is true.
Correct Answer: Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Solution : The correct answer is (a) Option A Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Consumer equilibrium occurs when the consumer's budget line is tangent to the highest possible indifference curve. This means that the consumer has allocated their budget in such a way that they cannot increase their utility by reallocating their spending. At this point, the consumer is maximizing their utility within the given budget constraint because any other consumption bundle would either exceed the budget or result in lower utility. Therefore, the reason provided correctly explains why consumer equilibrium occurs when the budget line is tangent to the highest possible indifference curve.
Question : Assertion: Consumer equilibrium can be achieved at a point where the consumer's budget line is parallel to the horizontal axis.
Reason: This occurs when the consumer allocates their entire budget to one good, maximizing their utility within the given constraint.
Question : Assertion: Consumer equilibrium can be achieved at a point where the consumer's budget line is steeper than any indifference curve.
Reason: This occurs when the consumer exhausts their budget on the good with the highest marginal utility.
Question : Assertion: Consumer equilibrium can occur at multiple points of tangency between the budget line and indifference curves.
Reason: The consumer can achieve the same level of utility by choosing different combinations of goods that are equally preferable.
Question : Assertion: Indifference curves cannot intersect each other.
Reason: If indifference curves intersect, it would violate the transitivity assumption of consumer preferences.
Question : Assertion: A consumer maximizes utility by consuming goods until the marginal utility per unit of money spent is equal across all goods.
Reason: The consumer aims to allocate their budget in a way that maximizes their overall satisfaction.
Option 1: Both the assertion and reason are true, and the reason is a correct explanation of the assertion
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